Civil Interim Measures In England **

Article by Keith Oliver *, Senior Partner and Head of the Commercial Litigation, Civil fraud and Asset Tracing Team, Peters & Peters Solicitors.

1. Introduction

   This chapter gives a practical overview of key civil interim measures and remedies available from the English civil court for securing recoveries for a victim of fraud, corruption or other acquisitive crime. The remedies described are regarded as the lawyers' 'Nuclear Weapons' and are often known as such. Properly applied for and used, freezing property and search orders can put the claimant in the strongest possible position on day one of the proceedings to trace, secure and recover the proceeds of the claim or fraud or corruption upon him, however that crime has been perpetrated. Dishonest defendants or those whose conduct requires it find they are suddenly - and without advance warning - hamstrung financially and may in practical terms be deprived of the oxygen of financial resources to go about their daily lives. With the surprise elements of a pre-emptive strike by way of freezing order and ancillary asset disclosure and tracing orders, the defendant often suffers a mortal wound to his defence from which there is no ultimate recovery to avoid judgment and execution of that judgment worldwide. For the purposes of clarity throughout the chapter C refers to the claimant victim(s) of the fraud or corruption, D refers to the defendant perpetrator(s) and T refers to third party accomplices.'

   To secure recovery it is necessary to have sufficient evidence to bring valid claims against D and sufficient assets against which a judgment can be enforced. Victims of fraud and corruption will be minded to (i) preserve assets to satisfy the expected civil judgment against D; (ii) preserve evidence that D might destroy or withhold if he becomes aware that the criminal offence has been discovered; (iii) obtain evidence from third parties that will aid the intended civil claim. Interim measures discussed below help achieve these objectives.

   The following three sections consider freezing (Mareva) orders, proprietary injunctions and other key ancillary orders. The fifth section focuses on search (Anton Piller) orders and the sixth examines other relevant considerations namely, illegally obtained evidence and the privilege against self-incrimination.

2. Freezing orders

   1. Background

      The order takes its name from Mareva Campania Naviera S.A. v International Bulkcarriers S.A. [1975] 2 Lloyd's Rep. 509. The Civil Procedure Rules now refer to it as a freezing injunction (CPR 25.1 (1)(f).

      It developed as a form of recourse against foreign-based defendants with assets within the UK and consequently the early authorities assumed that the injunction was not available against English-based defendants. In the same vein an early judicial guideline for the grant of the order required claimants to establish a risk of the removal of assets from the jurisdiction.

      Section 37(3) of the Supreme Court Act 1981 now provides that the injunction may be granted, to prevent defendants from removing from the jurisdiction 'or otherwise dealing with' the assets. Section 37 forms the basis of the jurisdiction for granting freezing injunctions 'in all cases in which it appears to the court to be just and convenient to do so'. The Court of Appeal held in Babanaft International Co. SA. v B(lssatne [1990] Ch. 13 that the wording of subsection 3 did not restrict the scope, geographical or otherwise, ofs.37(1). The Civil Procedure Rules currently provide that the injunction may be granted in relation to assets 'whether located within the jurisdiction or not' (CPR 25.1 (I )(f).

   2. Purpose and effect

      A freezing order prohibits D from unjustifiably dissipating his assets within the jurisdiction so that there are insufficient or no assets left to satisfy a judgment against him. To preserve assets pending enforcement, a freezing order can also be obtained post-judgment. If D has insufficient assets within the jurisdiction to meet the quantum of C's claim, the court can grant a worldwide freezing order.

   3. Penal notice

      Freezing orders, as well as search orders, are endorsed with a Penal Notice, which warns that disobedience of it may be regarded as contempt of court the penalty for which may be imprisonment, a fine or seizure of assets. Contempt may extend to any third parties who are notified of the order and do anything which helps or permits a breach its terms. However since the English court has no jurisdiction over third parties located abroad, the worldwide order has to be recognised, registered or enforced by the relevant foreign courts to be effective. This process is often described as 'domesticating' the English, order.

      The orders usually freeze assets up to a financial limit, calculated according the value of C's claim with likely legal costs and interest taken in to account. D can deal with any 'surplus' assets that exceed the limit of the order as he sees fit. In addition payment of a sum equal to the value of the limit into court or providing security in that sum can discharge the freezing order.

      A freezing order bites on the individual not his assets (in personam) and as such it does not grant any proprietary rights over the assets of D. It therefore does not confer on C any advantage in the event of D's insolvency. However, the position is different where proprietary rights are claimed over frozen assets (see Proprietary Injunctions below). A freezing order is an interim measure and therefore the standard form of order permits D to draw on frozen assets to pay a 'reasonable sum' for legal expenses and to pay a pre-set sum (fixed by the court) to meet ordinary living expenses. C is given a measure of control over any increases in expenses in order to prevent D from depleting his assets improperly. For example any increase in expenses has to be agreed with C, or in the absence of agreement, approved by the court.

   4. Asset disclosure

      The standard freezing order requires D to give details of the value, location and details of assets within the jurisdiction or elsewhere, for a worldwide freezing order. This enables C to identify the whereabouts of the assets and notify third parties of the freezing order. D may refuse to provide some or all of this information if in providing. it, he is likely to incriminate himself. The assertion of self incrimination privilege has been much curtailed in the United Kingdom (UK) by the Fraud Act 2006 - and in practical terms by the fact that reliance on the privilege is generally regarded as in effect an admission of liability. Forcing the fraudster defendantinto an assertion of self incrimination privilege can be the first stage in victory for the claimant victim. Where there are concerns about the completeness of D's disclosure on affidavit, C can apply to have D cross examined in relation to those assets. In addition, the court can grant orders requiring third parties (e.g., banks) to assist in identifying and locating assets and other relevant information.

   5. Application and requirements

      The application to the court for a freezing order, as well as a search order, is almost invariably made without notice to D (ex parte). The first time that D learns about the order should be when he is personally served with it (see below for more detail about Service). This is done so as not to 'tip off D and T about C's intention to commence proceedings or to take any legal steps to secure assets and/or evidence. The court may decide not to grant a freezing order if D has had notice of C's intentions because' the court is unlikely to make orders which are futile' (Oaktree Financial Services v Higham [2004] EWHC2098 Ch [10]).

   6. Grounds

      In order to obtain a freezing order, C needs to show:

      A good arguable case; and A real risk of unjustifiable dissipation of assets; and That the order is just and convenient in all the circumstances The court will not automatically conclude that because D is alleged to be dishonest he cannot be trusted not to dissipate his assets. Careful...